Companies overplaying their use of artificial intelligence (AI) — so-called “AI washing” — has been a growing issue for U.S. regulators and class action lawyers, but a review by the Ontario Securities Commission (OSC) found no compliance concerns among Canadian investment funds.
In the annual report for its investment management division, the OSC reported that it completed a review to look for potential AI washing by investment funds during its latest fiscal year (ending March 31).
That review, which flagged 15 issuers making references to AI and related topics (machine learning, large language models, etc.), found that most of these instances referred to investments in large companies that are “at the forefront of research and development of AI.”
“There was no evidence noted of issuers using the term AI or related terminology in a misleading manner to attract investors, or of AI being used to perform portfolio management services,” said the report, released Wednesday.
Other compliance reviews included a review of small fund managers and small funds, which found some firms making disclosure that “is inconsistent with regulatory requirements or is not fulsome in nature,” it noted.
That review is ongoing, the report said, and it indicated that OSC staff “will determine whether guidance is needed in this area upon completion of the review and in conjunction with the ongoing policy initiative related to the modernization of continuous disclosure.”
Along with reviews of recent compliance activity, the report also covers ongoing policy initiatives in the branch, including proposed reforms targeting chargebacks and to address the principal distributor model, along with a review of the regulatory framework for ETFs (the comment period for that just concluded on Oct. 31).
“As the industry continues to evolve, we remain committed to agile, balanced regulation that protects investors and supports innovation,” said Raymond Chan, senior vice-president, investment management at the OSC, in a release.
“We have broadened our scope to include regulatory policy matters related to both investment fund managers and portfolio advisers and are better positioned to respond to market trends and deliver on our strategic priorities,” he added.